From a US district court judge's opinion dated 7 August 2013[1]: "Bitcoin is a currency"
> . . . one could argue that derivatives based on the price of a Bitcoin are more akin to bets than financial derivatives
No, one couldn't. Pork bellies are definitely not a currency, but they're something of the prototypical subject of financial derivatives.
[1]: http://ia800904.us.archive.org/35/items/gov.uscourts.txed.14...
Yeah, because that carries a lot of weight...
> Pork bellies are definitely not a currency, but they're something of the prototypical subject of financial derivatives.
Pork bellies are a commodity and, as such, are regulated by the CFTC.
Intrade sold binary options depending on, among other things, the outcome of political elections. They were most definitely a bet, but they were still a security according to the CFTC.
“It is against the law to solicit U.S. persons to buy and sell commodity options, even if they are called ‘prediction’ contracts, unless they are listed for trading and traded on a CFTC-registered exchange or unless legally exempt,” http://www.outsidethebeltway.com/americans-shut-out-of-intra...
The CFTC sued Intrade in 2012, and Intrade closed its doors to US customers.
As for the price of Bitcoin? Like I said, it'll be interesting to see what the CFTC say.
(2) They're apparently using the Coinbase price (which appears to be based on the Bitstamp price). It's not clear how they're settling the options so I can't determine whether it actually matters whether there's an uninterrupted price feed or not.
(3) This is an inherent "feature" of an immature market such as this. Bitcoin seems to have skipped a step (futures). Besides, there's nothing to stop me from borrowing USD and converting it to Bitcoin in order to play around in the Bitcoin options market.
(4) Oh yes.